220. Do you mean later or now? This is all for
2003. Or do you mean, we will do this first and then tack on these
other bits later?
(Ms Pattison) Understanding what we want to do and
then thinking about the timetable. As much as we could do, which
made sense at its launch, we would want to do, although some things
may be easier to do than others. For example, the disabled premium
would be a relatively straightforward thing to bring in because
it exists in the main benefits supports that we are looking at.
But something like Disability Living Allowance (DLA) to be paid
for children, which is not means-tested and has a certain conditionality
about it, may not fit well with the tax credit system. So what
we are doing is looking at the impact on the DSS benefit system.

221. But you do not yet knowand if you
do not know that is fineexactly how some of these important
side issues are yet going to be finally disposed of?
(Ms Pattison) Not yet, no.

Mr Thomas

222. I would like to ask a few questions about
preparations for ICC. Perhaps it would be appropriate to start
with Nick Macpherson, although I would be obviously interested
to hear what the good people from the DSS have to say. Do you
think the target date of 2003 continues to be a realistic target
date?
(Mr Macpherson) Yes, I do. Clearly we are not complacent
about this. We think that 2003 is do-able. We would not have set
it as a date for introduction if we had not thought it was achievable.
In my view, we are on target, at the present time, to deliver
by then, obviously subject to things like legislation. You can
envisage circumstances where you have funny dates for the General
Election and legislative programmes might be lost, but my colleagues
at the Inland Revenue can probably say a bit more.

223. What do you need in terms of legislation?
First of all, do you need legislation?
(Mr Macpherson) Yes, we do need legislation. It would
be primary legislation. Obviously I do not think we can say, at
this stage, precisely what the size and scope of that legislation
would be, but when we introduced the Working Families Tax Credits
(WFTC) there was a Tax Credits Bill; so it seems reasonable to
conclude that one might do the same on this occasion which, after
all, represents probably a rather bigger reform.

224. So you need the legislationI will
come back to that in a moment, if you do not mindyou need
proper consultation, do you not, and presumably you need to sort
out the whole delivery issue, particularly bearing in mind the
upheavals in the DSS and the creation of the new Working Age Agency?
Perhaps your answers could embrace all those various issues.
(Mr Macpherson) Yes, we do need to take all of those
things into account. As I say, the timetable is demanding but
we think it is achievable. It is fair to say that we have been
having pretty much continual consultation on this issue since
the Chancellor originally announced it in the Budget in 1999.
We are having a continuing dialogue with a lot of pressure groups.
In fact, only on Monday of this week, I had a very productive
meeting with the Low Pay Unit which, I believe, has just submitted
a paper to your Committee.[1]
We are also having consultation with employers. Tony has a special
consultation group for the WFTC at the Inland Revenue. Since April
1999, with each successive Pre-Budget Report and Budget, we have
been seeking to expose more detail and indeed to encourage public
debate on this issue. To that end, we very much welcome the Committee's
interest in this subject and the evidence it has taken. So clearly,
as the proposals begin to firm up, we will consult more. I would
envisage that in the new year those details will begin to crystallise,
and the Government will clearly want to consult with those interested
in that detail before legislation is introduced.

225. Although there would have to be consultation
on the details of a proposed regime, would there not?
(Mr Macpherson) Certainly one wants to expose the
details of that regime and talk to those who are interested in
it.

226. What we have had so far, as far as the
published material is concerned, is the announcement in the Budget
of 1999. As we understand it, the only published material is the
Treasury document of March 2000,[2]
and I am sure you are aware of that. It may interest you to know
that the Institute of Fiscal Studies has given us evidence recently.
They were very clear in their view that 2003 was rather ambitious
as a target date.
(Ms Ghosh) Shall I pick up from there because you
have also raised two points at the DSS end. From the point of
view of DSS delivery, we see this programme in two contexts. First
of all, the way it fits and has synergy with our major modernisation
programme. We were lucky enough to be given £2 billion by
the Treasury last summer to update, on a rolling programme, various
elements of our outdated Legacy systems.

227. Could I interrupt you there. The Legacy
system must be IT.
(Ms Ghosh) Yes.

228. The one used for Child Benefit. That is
21 years old.
(Ms Ghosh) Indeed, it is. That is a Legacy system
and it is probably our oldest Legacy system.

229. "Legacy" seems the right word
to describe it.
(Ms Ghosh) I think it is a generic word, is it not?
Prehistoric. There is a Child Benefit system, which indeed is
21 years old, but there are other very antiquated systems. I do
not know whether any Member has been into a local Benefits Agency
office to see the computer systems people have on their desk.
No Windows. No Windows in the Microsoft sense. Black and green
screens.

230. No windows in the offices either.
(Ms Ghosh) No. Piles of paper. All that kind of thing.
So clearly we are looking for a good fit there with our on-going
programme, which we are structuring very much around the recommendations
in the McCartney Review:[3]
good planning up-front, incremental approach.

231. Your record has not been terribly good,
has it, frankly?
(Ms Ghosh) If you look across Government and the private
sector, very large IT systems are not without problems, but we
do feel that McCartney has given us very clear guidelines on which
to run. I know the tax credits end is working within that framework
as well, so we are hoping that our performance will be significantly
improved. The other angle is the Working Age Agency. As I said
at the beginning, for Income Support and Jobseeker's Allowance
customers, who are probably about 1.5 million of the caseload
on ICC, the gateway for them will be the Working Age organisation.
We are working with colleagues in Employment Services, in particular,
and DfEE, on precisely how that will go.

232. There has been slippage, as far as the
Working Age Agency is concerned, has there not? There is a fairly
major upheaval going on in the DSS, at the moment, is there not?
(Ms Ghosh) Yes. However, most of the reorganisation
in DSS is actually pretty well in place. From 20 November we were
assigned to our new categories, into our client facing groups.
That, in a sense, has made work easier, in that the relationship
between our Working Age client group and colleagues in the DfEE
and Employment Services is a much clearer one now. They have been
working continuously on that process of setting up the Working
Age Agency. I do not think DSS reorganisation is an issue, but
obviously there are very big organisational issues in bringing
about this Working Age Agency.

233. Why do you say it is not an issue? Of course,
it must be an issue if there is complete upheaval in the DSS.
How on earth are you going to stay on target for this major target
for 2003?
(Ms Ghosh) The management team and the DSS, in terms
of our internal organisation, took the decision in February of
this year that they would manage this change swiftlyand
they have managed it swiftly in terms of running preference exercises,
restructuring ourselves, and so on. As I say, between February
and November of this year, they have done it. So we are now in
our new organisation and it is not an obstacle to creation of
the Working Age Agency. Just to go back to the IT issues, I think
from a DSS end that it is, in a sense, a less complex issue for
us from an IT point of view than the building of a whole new tax
credits system. I do not know if you would like to know a bit
more about its various elements. Mary?
(Ms Pattison) It might be helpful if I describe what
we need to do within DSS, so that you can get a sense of that.
We need to do a number of things but for us it is not about designing
new systems for tax credits. It is about making changes to existing
systems, and those systems that are in development around the
modernisation programme. What we need to be able to do is to take
children out from the Income Support and Jobseeker's Allowance
systems, and manage a smooth migration of the cases across, including
advice. We need to ensure that leaflets and forms and so on are
modified and staff are trained. We need to provide effective links
with the Revenue so that data can be transmitted. We need to use
the modernisation programmes that have been put in place within
DSS, to include things like electronic information gathering and
better work flow management, to ensure that they are supporting
tax credits as they come on-stream. It is about what we are doing
within DSS. One of my jobs is to make sure that we have the right
skills marshalled within the Department, and that we are also
interacting within the other programmes, so that we are clearly
a part of their activity and clearly signalled. Therefore, that
we are meshing together. That is something that has been organised
at a fairly senior level within the Department to ensure that
it does happen.

234. Can I come back to you on this question
of legislation? You will be aware that there is such a thing as
a Tax Law Rewrite Project, which many people will commend if it
creates greater clarity. Do you envisage that the legislative
basis of ICC will require a complete rewrite of the legislation;
or will you prefer, as you have done in the past, perhaps tagging
on these impenetrable and extraordinarily complex amendments (I
speak as a lawyer) to existing legislation? This is because the
whole system is completely inaccessible to most people apart from
experts in tax law.
(Mr Macpherson) Tony is our resident expert on the
personal taxation system so he will probably be able to answer
that.
(Mr Orhnial) If we have start with the Tax Credits
Bill, which was brought in for the Working Families Tax Credit,
we see that certain things had to be done in the context of existing
social security legislation. Now for the ICC, new tax credits
generally, we will clearly need to look at all the component parts
of the existing system, and consider where they will need to be
unwound in some way and where it is a matter of changing them
slightly. It all depends what rules we arrive at, as to the way
the new tax credits will operate. But we do envisage a separate
bill which will contain a certain framework of rules, and a certain
balance of primary and secondary legislation. It is difficult
to be precise at this point until decisions have been taken on
the policy details. Whether or not we will have the legislation
drafted on Tax Law Rewrite lines is an issue we will need to look
at closer to the time, but what I will say is that the basic principles
of the Tax Law Rewrite enterprise are ones that are beginning
to permeate a lot of the work we do, particularly when we are
beginning from first principles. I would not, for a moment, like
to suggest that they are permeating every page of the Finance
Bill, but I think on new bits of legislation we see those principles
coming through.

235. If you do not mind me saying, Mr Orhnial,
I did think, with respect, that the way you answered the question
was a somewhat impenetrable answer. If you could answer the question
simply. Are you going to create a brand new piece of legislation
from scratch, which is self-contained and does not require people
combing through the whole of the tax legislation in order to find
out what the position is, or are you going to build on the accretion
of regulations?
(Mr Orhnial) What we would envisage is to have, as
much as possible, a separate and clear system. The extent to which
it will rely on other bits of legislation really depends very
much on the extent to which we are essentially reproducing existing
bits. With the new credits we are looking at a new enterprise
and a new system, so we would not envisage that happening to a
great degree. I am sorry if my answer was impenetrable. It is
as far as I can get with the knowledge I currently have.

236. It is not your decision ultimately anyway,
is it?
(Mr Orhnial) It is not, no.

Mr Thomas: Thank you very much.

Ms Buck

237. May I go back to policy-oriented questions
in respect of child poverty: obviously ICC, but some wider issues
on how you tackle child poverty. The targets, as you have again
confirmed this morning, are targets about poverty within the definition
of inequality, in effect. I think that is an important component
of it because we know that failure to be able to take part in
society, as it currently is, is part of the definition of poverty.
But there are two major problems related to that. I would like
to ask you what your current thinking is in responding to those
problems. The first is that the definition tends, therefore, to
be one of dealing with issues of breadth, not depth. It can steer
policy towards lifting those in shallow poverty above the cut-off
point. So I would like to know what your views are and your responses.
The second issue is: how can you be sure that the ICC and the
other policies, which are being developed, actually meet the real
needs of children?
(Ms Ghosh) You are absolutely right. The headline
measure for child poverty is almost always the relative income
measure. The Public Service Agreement target that Nick mentioned
earlier is to reduce the number of children living on less than
60 per cent of the median income by 2004. The Government has always
recognisedand this has been very much highlighted by the
second, the more recent of the two Opportunity for All
reportsthat simply looking at that relative income measure
is not the answer. In a funny sort of way, it would be simpler
to focus just on that because you could keep pumping money through
the tax and benefit systems, and you could keep taking out that
group just below the level, and you could trumpet your successes;
but actually it would not, in the long term, solve the problem
of child poverty at all. In the first Opportunity for All
report,[4]
just over a year ago, we had something like 15 indicators of what
success in abolishing child poverty means. I personally could
not remember what all those 15 were. This year, Ministers made
the conscious decision that we need to start focussing down and
indeed encouraging a debate on how we measure child poverty, to
pick up wider issues. As Nick says, clearly a key issue, given
the Government's approach to work being the best way out of poverty,
is the worklessness type of measure. This is clearly going to
be one of the small packages of measures of how you deal with
child poverty and so that is in there. We also included in the
five headline indicators we chose to focus on, something about
the quality of children's lives. This is because that is obviously
another issue, which I know several of the people who have appeared
or have given evidence to this Committee, have been very much
concerned about. It is not just a matter of income. It is also
the question of the experience of people's lives. So we have included
one on housing and we will be, (although we have not got firm
figures against it yet), including a measure on child health.
Again, those two are very closely related. I see that the Barnardo's
report, which is discussed in the paper today,[5]
emphasises the importance of that in the quality of living. So
there is income; quality of children's experience of life; and
the third thing Ministers want very much to focus on is the life
chance issue. That is really where you get into the issue of education.
Our fourth measure is about basic literacy and numeracy, which
very much chimes with DfEE policies. So we are beginning to focus
down on a basket of indicators, which is more than just income,
because for the most disadvantaged the education, housing, health
kinds of issues really impact on the quality not only of their
lives but on their children's lives and their children's children's
lives. Clearly this is going to be an on-going debate. It is one
in which we are, all the time, engaging academic commentators.
Ministers are very well informed about the deprivation-type work,
the basket of goods approach, that some commentatorsindeed,
some of the evidence to this Committeehas produced. For
example, we organised a seminar in the summer with various academics.
We had Brian Nolan over from Ireland, who is a respected academic,
talking about the Irish experience. So this is going to develop.
Ministers are very conscious of this. One group you did not mention,
for example, was disabled children. Disabled children are disproportionately
represented. We have been putting money through the various child
premia and so on. Again, that is the kind of issue on which when
you have dealt with the "easy" cases, you will need
to start looking at those sorts of groups and seeing how you can
do particular things to help those groups.

238. I thoroughly approve of the multi-faceted
approach to poverty, but it still leaves us with a problem of
income, which is what we are really discussing. We know that when
we were discussing the issue of pensioner poverty, the fact that
there ended up between Government and Age Concern who did the
work, a broadly accepted baseline definition of a modest but adequate
income, was critical in moving on the debate. Sue Middleton, to
whom you were referring, who has given evidence to this Committee,[6]
has done a lot of very valuable work on it. Why do you not do
that? Why do you not come up with a working definition of a modest
but adequate income for children, which then allows you, as another
one of your basket of indicators, to say how many children and
by what degree they are falling below what is acceptable?
(Ms Ghosh) Clearly, in setting the levels of Income
Support in the present system, what Ministers are doing all the
time is effectively making a judgment between what is an adequate
safety net, but one that is affordable in public expenditure terms
and one that maintains the work incentive issues. This is the
point the Chairman raised in his introductory remarks. Therefore,
that is the kind of judgment that Ministers are making about a
particular income. Again, I am talking to academic commentators.
There are all sorts of issues. Obviously you know this from the
evidence you have had about your basket of goodsif you
go back to the basket of goods approachwhat you would put
into the account, made up from the budget base approach, as an
adequate income. There are all sorts of people with different
views. Sue Middleton is one, Joseph Rowntree Foundation is another.

239. It was done for pensioners, with a degree
of acceptance by different Government agencies. I understand the
point you are making but the point is that the Income Support
definition started somewhere. We all know where it started. It
is not as if people are not adopting the approach of a basket
of goods. We are just adopting a basket approach which was devised
in 1901.
(Ms Ghosh) And one which we have since updated in
various ways.